Hess may bring LNG buyer into Equus

Hess Corporation has signalled it is likely to sell part of its Equus natural gas project in Western Australia to an Asian liquefied natural gas buyer as part of a deal to get the venture up and running.

Greg Hill, president of worldwide exploration and production at Hess, told investors that appraisal drilling and testing at its WA-390-P permit in the Carnarvon Basin off the WA coast had yielded positive results and that commercial talks with potential LNG partners who would process the gas are still ongoing.

Hess has made about 13 gas discoveries in its wholly-owned WA-390-P permit but does not intend to build its own LNG plant to process the gas. Instead, it has been in talks with companies including
Woodside Petroleum
and Chevron on the potential supply of the gas to their Pluto and Wheatstone projects, respectively. Hess has also pointed to a third alternative, of sending the gas to the North West Shelf venture’s plant, also near Karratha, for conversion into LNG.

A final investment decision for the multibillion-dollar Equus project is pencilled in for mid-2013, with production likely to start in late 2017.

The appraisal campaign, which included four wells and five drill stem tests (DSTs), “yielded some pretty important information for future development," Mr Hill said on a teleconference for the US company’s second-quarter results.

“For example, we were able to successfully drill the first offshore horizontal well in Australia, which will reduce the number of development wells required for the project. And the DST has also confirmed good reservoir continuity, high flow rates, and minimal contaminants in the gas stream," he added.

Mr Hill noted that the federal government has granted major project facilitation status to the Equus project, which will streamline the approvals process.

Asked whether Hess would bring in an equity partner to develop the gas, Mr Hill confirmed the company was considering that option.